Trade Deficit Expands on China Gap

The trade deficit expanded in August, and the country specific gap with China proved a key driver. With the Treasury report on foreign trading partners due Friday, and with capital controls being discussed privately, and given the fact that the federal government seems to have few bullets left in its traditional expansionary arsenal, this data seems to only provide further impetus to act against the yuan. After all, rising demand for imports could have instead manifested as increased demand for American made goods made by American workers who currently sit on the sidelines of an unfair playing field.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

(Tickers: Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: MACSX, Nasdaq: MATFX, NYSE: CZJ, Nasdaq: CHINA, PCX: FXI, PCX: CYB, NYSE: IWM, NYSE: TWM, NYSE: IWD, Nasdaq: AACFX, Nasdaq: GOPAX, Nasdaq: CHUSX, Nasdaq: GCHAX, Nasdaq: BUFCX, Nasdaq: DXHSX, Nasdaq: XHAOX, Nasdaq: NGCAX, Nasdaq: LNGZX, Nasdaq: DPCTX, Nasdaq: EICGX, Nasdaq: EPHCX, Nasdaq: FHKAX, Nasdaq: FHKCX, Nasdaq: IFCAX, Nasdaq: JCOAX, Nasdaq: XCAFX, Nasdaq: MCHFX, Nasdaq: NPCAX, Nasdaq: OBCAX, Nasdaq: UHPIX, Nasdaq: XGCHX, Nasdaq: TCWAX, Nasdaq: HPCHX, NYSE: ACH, Nasdaq: CHINA, Nasdaq: CBAK, Nasdaq: CSUN, NYSE: CHN, NYSE: GCH, Nasdaq: SOLF, Nasdaq: CAAS, NYSE: DB, NYSE: STD, Nasdaq: IBKC, NYSE: BCS, NYSE: MTU, Nasdaq: ITUB, NYSE: LYG, NYSE: MFG, NYSE: SAN, NYSE: C, NYSE: NBG, NYSE: AIB, NYSE: BAP, NYSE: WBK, Nasdaq: GGAL, NYSE: BLX, NYSE: JPM, NYSE: GS, NYSE: MS, NYSE: BAC, NYSE: WFC, NYSE: GE, NYSE: F, NYSE: X, NYSE: PGC, Nasdaq: HPCCX, NYSE: RTP, NYSE: BHP, NYSE: WMT, NYSE: TGT, Nasdaq: COST, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ)

Trade Deficit Expands on China Gap

With China on our minds, the International Trade Report gets a bit more than its usual attention today. This latest report covering August showed the trade gap expanded to -$46.3 billion, from the -$42.6 billion deficit seen in July (revised). Economists were looking for a trade deficit of -$44.3 billion for August. The expansion came on a greater increase in imports than exports, and an 8.1% expansion of trade deficit with China. The three-month moving average, which perhaps better weeds out noise, also showed the trade deficit expanded to -$46.2 billion, up from $44.7 billion in July. Without a leveling of the playing field, this trend, which has been clear for years now, will only continue, and the unfair divergence will widen.



Exports

Exports increased by $0.3 billion, on a similar increase in the export of services; goods exports remained the same as in July. Exports of consumer goods were relatively unchanged, but this could be a somewhat different story if American made goods stood on fair footing with China.

Decreases in the export of capital goods were offset by increases in the export of food products. Prices were higher for food products though, and thus likely played a role, along with the US filling of the hole left by the Russian export ban. Agricultural goods represent a dynamic area though, with sensitivity to many factors.

Exports of wheat were up 37.9% in August, but exports of soybeans increased 86.3%. While some of this may be on seasonal factors, there is also a replacement demand for food crops that occurs when a shortfall arises in another. We saw this when ethanol demand drew corn, and led farmers to employ more acreage to it, leaving less of other crops and driving an overall increase in the price of foods (due to less corn for food and less other crops generally). This may not be exactly the same case with wheat though, considering it is the main raw ingredient for most breads, and perhaps irreplaceable.

Also of interest, nonmonetary gold exports increased 47.5% in August, as gold prices continued to rise. Civilian aircraft exports decreased by 46.9% in August, but aircraft imports also fell.

Imports

Imports increased by $4.1 billion in August, on a $3.9 billion increase in the import of goods and a $0.2 billion increase in services imports. The increase in imports was largely driven by consumer goods demand, capital goods, and also automotive vehicles and parts. However, we regularly warn investors not to read too much into this, because much of it is likely due to Americans' intensified interest in lower cost items given the economic environment. Thus, it may not be as much a sign of an improving economic environment as it is a fickle shopper with little money to spend.

Increases in fuel and energy imports played a role in aggregate on the general imports rise, but nothing stood out on its own. Crude oil imports rose 1.3%. Industrial metals imports decreased. Imports of semiconductors rose by 22.7% though.

Country Specific Trade

Deficits were recorded, in billions of dollars, with China $28.0 (expanded from $25.9), OPEC $9.0 ($8.0), European Union $8.1 ($9.9), Mexico $6.0 ($5.3), Japan $5.8 ($4.9), Germany $3.4 ($3.6), Nigeria $2.7 ($2.4), Ireland $2.5 ($2.4), Venezuela $2.2 ($1.8), Canada $2.2 ($1.4), Korea $1.3 ($1.0), and Taiwan $1.2 ($1.0).

Clearly, trade with America's largest trading partner, China, is in focus, given the intensification of US government pressure on China with regard to its yuan policy. Imports from China grew 6.1% to a record $35.29 billion. Meanwhile, exports fell $92 million to $7.25 billion.

The August figures show surpluses, in billions of dollars, with Hong Kong $1.9 ($1.8 for July), Singapore $1.1 ($1.2), Australia $1.0 ($0.9), and Egypt $0.4 ($0.4).

President's IT Manufacturing Dream

The President has high hopes that America can expand its exportation of high technology and new technologies, but the US currently has a trade deficit in "advanced technology products," mostly due to American shipping of manufacturing overseas and due to the borrowing of technology by some of our foreign trade partners. This is why we see the sharp increase in the semiconductor commodity; it is a commodity, though, and not generally difficult to produce anymore on average. Of course, advanced semiconductors are mostly developed and produced in technologically advanced nations like ours.

Take note that the great demand of our developed marketplace, economy and civilization also hungers for and draws advanced goods, and thus will always act as a natural cross-current to the President's dream. Without a fair currency environment though, not only will America never export solar panels into China, but Americans will buy all of theirs from China as well.

Advanced technology products exports were $21.8 billion in August and imports were $30.6 billion, resulting in a deficit of $8.8 billion. August exports were $2.1 billion less than the $23.9 billion in July, while August imports were $0.2 billion less than the $30.8 billion in July. Again, the cross-current mentioned above will always come into play.

Against Last Year

The year-to-year comparison is important in this report, as it offers better insight into trade trends.

Goods:

The August 2009 to August 2010 increase in exports of goods reflected increases in industrial supplies and materials ($7.2 billion); capital goods ($6.4 billion); automotive vehicles, parts, and engines ($2.0 billion); consumer goods ($1.3 billion); other goods ($1.2 billion); and foods, feeds, and beverages ($1.0 billion).

The August 2009 to August 2010 increase in imports of goods reflected increases in industrial supplies and materials ($12.0 billion); capital goods ($8.3 billion); consumer goods ($7.4 billion); automotive vehicles, parts, and engines ($6.1 billion); foods, feeds, and beverages ($1.1 billion); and other goods ($0.5 billion).

Services:

The August 2009 to August 2010 increase in exports of services was $4.4 billion. The largest increases were in other private services ($1.5 billion), royalties and license fees ($1.3 billion), and travel ($1.1 billion). Within other private services, the largest increase was in business, professional, and technical services.

The August 2009 to August 2010 increase in imports of services was $2.8 billion. The largest increases were in other transportation ($1.2 billion), other private services ($0.6 billion), and royalties and license fees ($0.4 billion). Within other private services, the largest increase was in business, professional, and technical services.



Article should also interest investors in Deutsche Bank (NYSE: DB), Banco Santander SA (NYSE: STD), IberiaBank (Nasdaq: IBKC), Barclays (NYSE: BCS), Mitsubishi UFJ Financial (NYSE: MTU), Itau Unibanco Holding (Nasdaq: ITUB), Lloyd's Banking Group (NYSE: LYG), Mizuho Financial (NYSE: MFG), Banco Santander- Chile (NYSE: SAN), Citigroup (NYSE: C), National Bank of Greece (NYSE: NBG), Allied Irish Bank (NYSE: AIB), Credicorp (NYSE: BAP), Westpac Banking (NYSE: WBK), Grupo Financiero Galicia (Nasdaq: GGAL), Banco Latinamericano de Comer (NYSE: BLX), J.P. Morgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: MACSX, Nasdaq: MATFX, NYSE: CZJ, Nasdaq: CHINA, PCX: FXI, PCX: CYB, NYSE: IWM, NYSE: TWM, NYSE: IWD, Nasdaq: AACFX, Nasdaq: GOPAX, Nasdaq: CHUSX, Nasdaq: GCHAX, Nasdaq: BUFCX, Nasdaq: DXHSX, Nasdaq: XHAOX, Nasdaq: NGCAX, Nasdaq: LNGZX, Nasdaq: DPCTX, Nasdaq: EICGX, Nasdaq: EPHCX, Nasdaq: FHKAX, Nasdaq: FHKCX, Nasdaq: IFCAX, Nasdaq: JCOAX, Nasdaq: XCAFX, Nasdaq: MCHFX, Nasdaq: NPCAX, Nasdaq: OBCAX, Nasdaq: UHPIX, Nasdaq: XGCHX, Nasdaq: TCWAX, Nasdaq: HPCHX, NYSE: ACH, Nasdaq: CHINA, Nasdaq: CBAK, Nasdaq: CSUN, NYSE: CHN, NYSE: GCH, Nasdaq: SOLF, Nasdaq: CAAS, NYSE: GE, NYSE: F, NYSE: X, NYSE: PGC, Nasdaq: HPCCX, NYSE: RTP, NYSE: BHP, NYSE: WMT, NYSE: TGT, Nasdaq: COST.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

US & Europe United Against China in Fair Trade Quarrel

Today's Coffee

A busy business day offers a slew of market moving datapoints. The US market seems to be benefiting somewhat from a favorable service sector report, showing a better pace of economic expansion in the critical segment of the US economy. The Asia-Europe Summit and an unexpected expansionary action by the BOJ also offered significant support to global trading today. The combination of these factors has the Dow up 1.7% today. Find all the day's market moving factors analyzed below.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

(Tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ, AMEX: GLE, Nasdaq: GOOG, Nasdaq: AAPL, Nasdaq: RIMM, NYSE: WAG, NYSE: TLB, LSE: BAY.LN, NYSE: LCC, NYSE: AXP, NYSE: MA, NYSE: V, Nasdaq: GOOG, Nasdaq: RIMM, Nasdaq: AAPL, Nasdaq: INTC, Nasdaq: MUSA, Nasdaq: DMND, Nasdaq: RMCF, Nasdaq: TISI, NYSE: WWW, NYSE: YUM, NYSE: FUN, NYSE: IRM, NYSE: OKE, NYSE: JEF, Nasdaq: ARIA, NYSE: COV, Nasdaq: IPXL, NYSE: MRK, NYSE: WPI, Nasdaq: ARUN, Nasdaq: AZPN, Nasdaq: DCTH, Nasdaq: ECPG, Nasdaq: LAWS, Nasdaq: NETL, Nasdaq: KNXA, NYSE: BKD, Nasdaq: BMTI, Nasdaq: ABCD, Nasdaq: CLUB, NYSE: AH, Nasdaq: CDCS, Nasdaq: LANC, NYSE: ENV, Nasdaq: ACIW, Nasdaq: BCSI, Nasdaq: MRGE, Nasdaq: HWCC, Nasdaq: TYPE, Nasdaq: SMED, Nasdaq: FRED, Nasdaq: SFSF, Nasdaq: HRBN, Nasdaq: NEWS, Nasdaq: SXCI, Nasdaq: VRTU, Nasdaq: NETL, Nasdaq: CATM, Nasdaq: CHSI, Nasdaq: EXPO, Nasdaq: TRCR, Nasdaq: AZPN, Nasdaq: EXAS, Nasdaq: MRCY, Nasdaq: WBMD, Nasdaq: PRXL, Nasdaq: SUPG, Nasdaq: SCMP, AMEX: ANX, NYSE: SPN, NYSE: MDR, NYSE: NBL, Nasdaq: BEXP, NYSE: EOG, NYSE: PXD, Nasdaq: HERO, NYSE: OII, Nasdaq: WRES, NYSE: KEG, Nasdaq: GIFI, NYSE: PKD, Nasdaq: ROSE)

US & Europe United Against China in Fair Trade Quarrel

Europe came out strong on the side of the US with regard to China's currency manipulation, despite a recently offered Chinese incentive to look the other way. That unified position boosts the probability of China choosing fairness over trade war in response to American complaints. ISM's Non-Manufacturing Index eased concerns about slippage in American economic growth, and the two factors combined to give support to trading.

International Wire

The Bank of Japan (BOJ) issued its latest monetary policy decision today, cutting its key rate for the first time in about two years. The BOJ move took its key lending rate to effectively zero percent. The BOJ also announced a $418 billion quantitative easing program to spur economic growth. The move gave strength to gold (Dec. Delivery up 1.75% to $1,340 per ounce), oil (WTI Crude Nearest Delivery +1.4% to $82.60), but the dollar weakened as attention turns to the US Fed to make similar moves.

The Asia-Europe Summit is underway in Brussels, with niceties exchanged between EU and Chinese leadership initially. ECB Chief Jean-Claude Trichet perhaps had the most controversial statement, simply talking along the lines of US Treasury Secretary Geithner in saying that China had not evolved its currency as expected. In fact, EU representatives did not take the bait offered by China when it said it would buy Greek debt; instead they kept to the critical position against the Chinese unfair currency status. Somewhere in Athens, George Papandreou popped an aspirin.

The European positioning is critical to US interests, because we are much more persuasive aligned then we would be alone. China moved to alter the anticipated European response, by addressing the Europeans' most pressing needs. The Chinese Premier showed up in Greece over the weekend, and after visiting the Parthenon, offered to buy Greek debt. It was quite a bribe. We have to wonder how China feels about those Greek bonds now, given the European stance on the yuan today.

The highly anticipated meeting between China's Premier Wen Jiabao and Japanese Prime Minister Naoto Kan at the Asia-Europe Summit concluded with Japan announcing its maritime spat with China had concluded (geopolitical factor effectively defused). Sometimes all it takes is a face to face meeting to fix things that seem otherwise complicated.

Economic Reports

The International Council of Shopping Centers (ICSC) published its latest Weekly Same-Store Sales data Tuesday morning. For the period ended October 2, same-store sales fell 0.8% against the prior week's activity, which was up 0.4% against the week before. On a year-over-year basis, sales continued to soften against normalizing comparables from the prior year, rising just 2.4% in this latest check (+3.6% week before).

Now that we have cleared the Labor Day holiday and the back-to-school impact, we are receiving clearer reads on consumer spending activity through this report, but the news was not good (as predicted here). Redbook reported year-over-year sales rose 2.7% for the same period. The ICSC blamed harsh weather on the drop, but we expect time and data will prove otherwise.

ISM Non-Manufacturing Index

The Institute for Supply Management (ISM) posted its Non-Manufacturing Index this morning. The September reading of the index showed improvement, to a mark of 53.2, from 51.5 in August. Economists had forecast the service sector barometer might reach just 52.0. The reading continues to mark economic expansion, above the 50.0 water mark.

The service sector dominates 90% of US economic activity, and so the measure is important and driving stocks today. However, the market is enthused because the index did not deteriorate further; the mark still stands precariously close to economic contraction territory.

There was some other good news within the report though that likewise supports the day's trading direction. While current business activity moderated, or grew at a slower pace, new order activity gained pace.

DC Doings

In DC doings, a Senate subcommittee is holding a joint hearing to determine how the president might use an expedited recession authority.

Corporate Wire

In corporate news, Walgreens (NYSE: WAG) posted better than expected September sales and its shares are up 3.3% as a result today. Talbots (NYSE: TLB) noted a third quarter sales decline, and its shares are likewise lower today, down 11.5%. British Airways PLC (LSE: BAY.LN) noted its sharpest traffic gain in two years this September, and its first increase since February; BA's shares are up 6.5% as a result. US Airways (NYSE: LCC) shares are up about a percentage point after it noted an increase in September traffic and revenue, and announced expectations to turn a profit this year. American Express (NYSE: AXP) shares are down another 3% today, after losing 6.5% yesterday, as it determined to fight a US antitrust complaint rather than settle like its peers MasterCard (NYSE: MA) and Visa (NYSE: V). Google's (Nasdaq: GOOG) Android is the top smart phone choice of consumers over the past month, according to Nielson, with RIM's (Nasdaq: RIMM) and Apple's (Nasdaq: AAPL) well-known rival products tying for second.

Look for Intel's (Nasdaq: INTC) CEO to discuss innovation before the Council on Foreign Relations in New York. Metals USA's (Nasdaq: MUSA) IPO lockup period concludes Tuesday. In New York City, the India Investment Forum will host India's finance minister and executives from 40 high-growth and significant Indian firms.

Remember "Rogue Trader" Jerome Kerviel, of Societe' Generale? His trial has concluded, and the poor fellow seems to have been attributed all blame for his actions and ordered to pay his former employer an impossible amount of money in retribution, $4.9 billion euros to be exact. Oh and he will also spend three years in prison. And what is Societe Generale's punishment for its role? After all, it was responsible for the selection of employees and the supervision of them, and also for the design and implementation of a system of trading that might not allow for such aggregious trading activity and losses. What is Societe Generale's penalty? It's a tarnished brand.

The day's earnings schedule includes reports from Diamond Foods (Nasdaq: DMND), Rocky Mountain Chocolate Factory (Nasdaq: RMCF), Team Inc. (Nasdaq: TISI), Wolverine World Wide (NYSE: WWW) and Yum! Brands (NYSE: YUM). Cedar Fair LP (NYSE: FUN) has a conference call scheduled to discuss its long-term strategy and financial goals. Iron Mountain (NYSE: IRM) and ONEOK Partners (NYSE: OKE) have investor days scheduled.

The Jefferies & Co. (NYSE: JEF) Global SpecPharma & European Healthcare Conference offers presentations by ARIAD Pharmaceuticals (Nasdaq: ARIA), Covidien (NYSE: COV), Impax Laboratories (Nasdaq: IPXL), Merck (NYSE: MRK) and Watson Pharmaceuticals (NYSE: WPI).

The William Blair & Company Emerging Growth Stock Conference brings news from Aruba Networks (Nasdaq: ARUN), Aspen Technology (Nasdaq: AZPN), Delcath Systems (Nasdaq: DCTH), Encore Capital Group (Nasdaq: ECPG), Lawson Products (Nasdaq: LAWS), NetLogic Microsystems (Nasdaq: NETL), Kenexa (Nasdaq: KNXA), Brookdale Senior Living (NYSE: BKD), BioMimetic Therapeutics (Nasdaq: BMTI), Cambium Learning (Nasdaq: ABCD), Town Sports International (Nasdaq: CLUB), Accretive Health (NYSE: AH), CDC Software (Nasdaq: CDCS), Lancaster Colony (Nasdaq: LANC), Envestnet (NYSE: ENV), ACI Worldwide (Nasdaq: ACIW), Blue Coat Systems (Nasdaq: BCSI), Merge (Nasdaq: MRGE), Houston Wire & Cable (Nasdaq: HWCC), Monotype Imaging (Nasdaq: TYPE), Sharps Compliance (Nasdaq: SMED), Fred’s (Nasdaq: FRED), SuccessFactors (Nasdaq: SFSF), Harbin Electric (Nasdaq: HRBN), NewStar Financial (Nasdaq: NEWS), SXC Health Solutions (Nasdaq: SXCI), Virtusa (Nasdaq: VRTU), NetLogic Microsystems (Nasdaq: NETL), Cardtronics (Nasdaq: CATM), Catalyst Health Solutions (Nasdaq: CHSI), Exponent (Nasdaq: EXPO), Transcend Services (Nasdaq: TRCR), Aspen Technology (Nasdaq: AZPN), EXACT Sciences (Nasdaq: EXAS), Mercury Computer (Nasdaq: MRCY), WebMD (Nasdaq: WBMD), and Parexel (Nasdaq: PRXL).

SuperGen (Nasdaq: SUPG), Sucampo Pharmaceuticals (Nasdaq: SCMP), Adventrx (AMEX: ANX) present at the Biotechnology Industry Organization Annual BIO Investor Forum.

Superior Energy Services (NYSE: SPN), McDermott International (NYSE: MDR), Noble Energy (NYSE: NBL), Brigham Exploration (Nasdaq: BEXP), EOG Resources (NYSE: EOG), Pioneer Natural Resources (NYSE: PXD), Hercules Offshore (Nasdaq: HERO), Oceaneering International (NYSE: OII), Warren Resources (Nasdaq: WRES), Key Energy (NYSE: KEG), Gulf Island Fabrication (Nasdaq: GIFI), Parker Drilling (NYSE: PKD) and Rosetta Resources (Nasdaq: ROSE) present at the Johnson Rice & Company Energy Conference.



Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

China & Terror - The Wolves Cry

Pre-Market Wire
Greek Factor: -1

While there are two economic reports on tap for 10:00 AM release, the pre-market is abuzz with terror threats and China travails. Chinese representatives have been active this weekend, following US legislative action last week and ahead of this week's EU-Asia summit. Meanwhile, the US government sounded the alarm on a new terror concern in Europe. But if you hold on long enough, you'll have Factory Orders and Pending Home Sales to guarantee your heart attack this Monday morning.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

(Tickers: NYSE: CMN, NYSE: SKY, Nasdaq: SCOK, NYSE: MOS, Nasdaq: ASIA, Nasdaq: PRASX, NYSE: PUA, NYSE: NWD, NYSE: PCP, NYSE: ATK, NYSE: LMT, NYSE: COL, Nasdaq: AVAV, Nasdaq: ATRO, NYSE: HON, Nasdaq: CRDN, NYSE: BA, NYSE: CGT, Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: MACSX, Nasdaq: MATFX, NYSE: CZJ, Nasdaq: CHINA, PCX: FXI, PCX: CYB, NYSE: IWM, NYSE: TWM, NYSE: IWD, Nasdaq: AACFX, Nasdaq: GOPAX, Nasdaq: CHUSX, Nasdaq: GCHAX, Nasdaq: BUFCX, Nasdaq: DXHSX, Nasdaq: XHAOX, Nasdaq: NGCAX, Nasdaq: LNGZX, Nasdaq: DPCTX, Nasdaq: EICGX, Nasdaq: EPHCX, Nasdaq: FHKAX, Nasdaq: FHKCX, Nasdaq: IFCAX, Nasdaq: JCOAX, Nasdaq: XCAFX, Nasdaq: MCHFX, Nasdaq: NPCAX, Nasdaq: OBCAX, Nasdaq: UHPIX, Nasdaq: XGCHX, Nasdaq: TCWAX, Nasdaq: HPCHX, NYSE: ACH, Nasdaq: CHINA, Nasdaq: CBAK, Nasdaq: CSUN, NYSE: CHN, NYSE: GCH, Nasdaq: SOLF, Nasdaq: CAAS, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ)

China & Terror - The Wolves Cry

Between terror threats levied against the region and the Chinese activity, Europe has its hands full this morning. Just when we thought the threat of sovereign default and euro disintegration were enough to handle! It looks like Europe and China will be the themes to our upcoming Monday release of "This Week," but for now, please chew on Monday's economic data slate and other market moving events.

China on my Mind
Greek Factor: 0

China's markets will be closed Monday, and through the week, but China is in the news nonetheless. The emerging giant is hosting the latest UN Climate Change Conference. Meanwhile, its Premier Wen Jiabao, visited Greece on his way to the EU-Asia Summit in Brussels. He offered some support for the Achilles heel of Europe. China's leader said his rich nation would support Greece's capital raising efforts, once it returned to the debt market. He also extended $5 billion in credit to Greek shipping companies that purchase Chinese made vessels. He said he offered all this because he would like to see a stable euro, but it seems he may also be worried Europe might go the route of the US with regard to his nation's currency status and his country's trading irregularities.

Terror Warnings
Greek Factor: -1

Has the boy cried wolf too often, or has it just been too long since the wolf last wandered into town, so that we've all forgotten about him and his teeth? The US government issued a travel warning to Americans traveling to Europe. Intercepts of communications and the presence of EU residents choosing to holiday in terrorist training camps had the US government sounding the alarm sirens this weekend. Americans are to be on the look out for Mumbai (Bombay) style attacks of terrorists armed with automatic weapons seeking havoc in crowded places throughout Europe, and a few specific locations (London is high on the list).

Yet, the interviews we've seen depict Americans as unalarmed. We worry though that the individuals chirping so confidently today, will be the same birds running around like chickens without heads when chaos does eventually break loose. Thus, we've come full circle and are now as unprepared mentally for terrorism as we were on 9/11.

Pay Attention!

The US government would not issue a warning like this these days if three conditions did not exist, no matter what the few representatives acting without license have said on camera. The government would raise this alarm only if a real threat existed; if it was relatively imminent or timing unpredictable and near; and if it was outside of its control to stop or contain. Therefore, yes, you should be concerned if you are traveling to Europe. Yes, the wolf is loose; and yes, the boy is crying loudly but should be obeyed.

Pending Home Sales
Greek Factor: 0

Two economic reports are scheduled for Monday morning. Look for the Pending Home Sales data release for the month of August at 10:00 AM. The release for July showed a 5.2% gain against June, to a mark of 79.4. July's reading benefited as it followed two months of decline in the absence of the housing stimulus. Housing continued soft through the summer though, and so we expect a temporary bounce of the dead-cat sort could be exposed in the Pending Home Sales data of the next couple months. It's old news though, and so understood.

Factory Orders
Greek Factor: -1

Factory Orders are due for release at 10:00 AM. Economists expect the data to show a 0.3% decline for August, given the Durable Goods Orders data that has already been released. Durables fell 1.3%, but when excluding transportation, rose by 2%. Motor Vehicles sales were so so in September, after a slip in August, and manufacturing was generally reported soft through the summer. Last week, ISM showed manufacturing remained sketchy in September.

Corporate Wire

The day's short earnings schedule includes Cantel Medical (NYSE: CMN), Skyline (NYSE: SKY), Sinocoking Coal & Coke (Nasdaq: SCOK) and The Mosaic Company (NYSE: MOS).



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Trade Deficit Expands in June 2010

Trade Deficit Expands

It looks as though June's stronger dollar played a short-term role in international trade. The latest trade report showed an expanded deficit, mostly due to the trade of non-petroleum goods and an expanded trade deficit with China, the EU and OPEC nations. We found it troubling to see exports fell in June, while imports grew. The best case realistic scenario is one where both imports and exports are growing.

Markos N. Kaminis earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, for Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV & radio. While writing for Wall Street Greek, he presciently predicted the financial crisis in detail.

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Trade Deficit Expands in June 2010

The headline report today came in the form of the International Trade data for the month of June. The report was released in the pre-market, and offered an exaggeration of expectations. Economists expected the deficit to show modest expansion in June, to $42.35 billion. Rather, the deficit widened broadly to -$49.9 billion, the widest mark since October 2008. While a return to the economic activity of years past should translate into higher trade deficit, the drivers this month were not entirely positive in nature. The trade deficit for June will also play a negative factor in Q2 GDP revision.

The deficit expanded, not due to faster growth in imports than exports, which would be healthy and normal historically speaking, but due to polar divergence between imports and exports. While imports increased by $5.9 billion, exports dropped $2.0 billion against May levels. All the action was centered around the trade of goods versus services, and goods carry 3.4 times the importance of services in trade, based on June's data.

You might have expected the deficit to be greatly impacted by reduced European demand for US exports given EU issues, and the deficit between the EU and US did expand to $7.8 billion, from $6.2 billion. However, it was an expansion of the trade deficit with China that did most of the driving in June, with deficit expansion to $26.2 billion, from $22.3 billion.

The deficit also expanded between OPEC nations and the US, to $8.9 billion from $7.8 billion. We would expect this to be the result of change in the price of energy and petroleum based goods in June. However, oil prices came down sharply from May, and the average price of oil in June was lower as a result of little change through the month. Indeed, the non-seasonally adjusted petroleum deficit stood at $21.2 billion, while the non-petroleum unadjusted deficit was $40 billion. The government notes the numbers do not add up due to seasonal adjustment and rounding. Petroleum imports greatly outweigh exports, and so the petroleum trade deficit actually narrowed slightly in June. It seems something else is driving the general trade deficit expansion between the US and OPEC nations. After inspection, it was the seasonal adjustment to petroleum trade that led to the expansion, and volumes demanded increased by 32 million barrels. Perhaps Gulf moratorium and related issues played a role.

The details of the report show that the deficit was mostly driven by decreases in the export of capital goods ($1.4 billion), industrial supplies and materials ($1.0 billion) and increases in the import of consumer goods ($3.1 billion), automotive vehicles and parts ($1.3 billion), other goods ($0.6 billion) and capital goods ($0.5 billion). The decrease in exports is troubling in this context against a sharp increase in imports, and it may be due to the stronger dollar that existed in June.

The euro and British pound have gained ground against the dollar over the past month though, thanks to EU stress tests, and the yuan is doing the same on China's economic reins. However, in light of the latest Fed informal forecast published within its monetary policy statement, risky assets are selling off and the dollar is strengthening again.

Buyers of commodities are global shoppers, and will take from cheapest source; it seems where options exist and where differentiation is minimal, the US can't compensate its exporting activity for dollar strength. The good news is that we're a finished goods producer, wherever we still produce goods. However, with the rapid development of the emerging world, perhaps the American differentiation advantage dissipates. Perhaps then trade is even more sensitive to currency fluctuation, in the world's favor versus the US. This brings currency policy with unfair players like China into focus, and so expect to see a rising argument in the American political spectrum.

The gain in imports may also have been affected (like exports) by relative dollar strength in June, versus the organic demand for goods we would hope for in economic recovery. Are American products losing their luster overseas and at home, as we demand more payment in foreign currency and find cheaper foreign goods more appealing? I would not lose too much sleep over this, as I think it's clear this is only a temporary effect, as the dollar should lose value over time (and has since June), in my long-term view. Also, transportation costs look to rise as global growth resumes and pressures fuel prices again, putting pressure on foreign producers selling into the states.

I also look for (hope for) an American manufacturing revival in the alternative energy technology space, which could boost demand for American differentiated goods again overseas. I'm not just speaking to solar panels, but to the autos and other goods that will include new and hopefully well protected technology. This is something any American president should be seeking, as the nation has its working class majority to provide for, as well as the sophisticates we all seem to think we are.



This article might also interest investors in Teekay Corp. (NYSE: TK), Navios Maritime Holdings (NYSE: NM), Navios Maritime Acquisition (NYSE: NNA), Navios Maritime Partners L.P. (NYSE: NMM), Tsakos Energy Navigation Ltd. (NYSE: TNP), Overseas Shipholding Group (NYSE: OSG), International Shipholding (NYSE: ISH), Excel Maritime Carriers (NYSE: EXM), Safe Bulkers (NYSE: SB), Claymore/Delta Global Shipping ETF (NYSE: SEA), Genco Shipping & Trading (NYSE: GNK), Diana Shipping (NYSE: DSX), Danaos (NYSE: DAC), Tsakos Energy Navigation (NYSE: TNP), Ship Finance Int'l (NYSE: SFL), Nordic American Tanker (NYSE: NAT), Seaspan (NYSE: SSW), General Maritime (NYSE: GMR), DHT Maritime (NYSE: DHT), Brunswick (NYSE: BC), Marine Products Corp. (NYSE: MPX), DryShips (Nasdaq: DRYS), Top Ships (Nasdaq: TOPS), Eagle Bulk Shipping (Nasdaq: EGLE), Sino-Global Shipping (Nasdaq: SINO), Paragon Shipping (Nasdaq: PRGN), K-SEA Transportation Partners (NYSE: KSP), Euroseas (Nasdaq: ESEA), Star Bulk Carriers (Nasdaq: SBLK), Omega Navigation (Nasdaq: ONAV), Knightsbridge Tankers Ltd. (Nasdaq: VLCCF), TBS Int'l (Nasdaq: TBSI), Golar LNG (Nasdaq: GLNG), Claymore/Delta Global Shipping (Nasdaq: XSEAX), American Commercial Lines (Nasdaq: ACLI), Norfolk Southern (NYSE: NSC), Canadian National Railway (NYSE: CNI), CSX (NYSE: CSX), Union Pacific (NYSE: UNP), Federal Express (NYSE: FDX), UPS (NYSE: UPS), Kansas City Southern (NYSE: KSU), Burlington Northern Sante Fe (NYSE: BNI).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.